Venture Capital Firms, Once Discreet, Learn the Promotional Game

Marc Andreessen, left, and Ben Horowitz founded a venture capital firm in 2009 that has rocketed to the top ranks, serving as a case study in successful self-promotion.Credit
Paul Sakuma/Associated Press

SAN FRANCISCO — It wasn’t so long ago that venture capitalists kept secrets. The young start-ups they backed certainly sought attention, but most venture capitalists operated under levels of secrecy typically reserved for Swiss banks.

Sequoia Capital, the prominent firm behind such tech behemoths as Apple and Google, and several other top venture firms stopped accepting investments from public institutions like the University of California system just to avoid having their financials disclosed to the press.

Self-promotion was shunned by venture capitalists as crass. Eyes rolled when Timothy C. Draper, a founder at Draper Fisher Jurvetson, graced a 2006 cover of the Thomson-Reuters Venture Capital Journal in a Captain America costume.

Investment partners at Sequoia even used a disparaging name for venture capitalists who promoted themselves to the press: “parade jumpers.”

Now, Sand Hill Road in Silicon Valley is one long parade route. Venture capitalists are hiring full-time public relations experts to tell bloggers and reporters of their investing prowess. They publicize their every doing and thought on Twitter and in blog posts.

In the last year, several top firms have hired people to handle marketing, branding and public relations full time. Among them: Kleiner Perkins Caufield & Byers, Lightspeed Venture Partners and True Ventures. Many others, like Benchmark Capital, New Enterprise Associates and Greylock Partners, keep public relations firms on retainer.

A number of V.C. firms ranging from some of the oldest, like Bessemer Venture Partners, to some of the youngest, like Peter Thiel’s Founders Fund, are now seeking full-time marketing experts.

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Margit Wennmachers, a public relations expert, was made a full partner at Andreessen Horowitz.Credit
Peter DaSilva for The New York Times

Even Sequoia, which sniffed at the notion when the trend began, has hired P.R. staff.

The self-promotion, branding and race to build an admiring Twitter following, people here say, is a symptom of the stresses on the consolidating venture capital industry. Fewer venture firms are trying to raise money from pension funds, universities and others institutions.

There are now 526 venture capital firms actively investing in the United States, down from 1,022 firms in 2000, according to the National Venture Capital Association. In the last 10 years, venture firms returned, on average, an abysmal 4.6 percent to investors. Institutional investors are looking to scale back on the asset class and reallocate funds just to top firms, where the competition to raise money and invest in hot technology start-ups is fierce.

Ten years ago, entrepreneurs needed some kind of insider advantage to get a meeting with a firm. Now the most promising entrepreneurs do careful due diligence — on Twitter, in blogs and in the media — before agreeing to take coffee with a V.C. The best entrepreneurs are courted by the venture capitalists, not the other way around.

But the biggest catalyst for the attention-seeking atmosphere, venture capitalists say, has been the rise of Andreessen Horowitz. The speed with which the venture firm — started by Marc Andreessen, the co-founder of Netscape, and Ben Horowitz, a former executive there — has rocketed to the top ranks has served as a case study in successful self-promotion.

The two men started their firm in 2009, when Silicon Valley was still reeling from the financial crisis. It was the era in which seasoned investors at Sequoia Capital had just delivered a PowerPoint presentation to entrepreneurs at their portfolio companies titled: “R.I.P. Good Times.”

Mr. Andreessen and Mr. Horowitz based their firm’s strategy on a simple investment thesis: each year 15 deals account for 97 percent of all venture capital profits. To be successful, they would have to pursue those 15 companies. And they would do it by aggressively marketing their expertise to the reporters and bloggers who follow start-ups. And they would appeal directly to entrepreneurs in blogs and on Twitter.

It worked right from the outset. In July 2009, Fortune announced the firm in a cover article. The debut was widely covered in popular technology blogs like TechCrunch, VentureBeat and All Things Digital.

Then in 2010, the firm hired Margit Wennmachers, a founder of the Outcast Communications P.R. firm who had built it into the top adviser of tech start-ups. She was far from being just a hired gun. Ms. Wennmachers was instrumental in the firm’s initial coverage and she was made a full partner, sitting at the table at the earliest stages of investment decisions.

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Tim Draper in a Captain America costume on an industry magazine cover.

“To be a top five firm, you have to brand yourself,” Ms. Wennmachers said in an interview. “We didn’t want entrepreneurs to say, ‘Who are these people?’ We didn’t want to start a fund by ‘the tall guy who invented a browser,’ so we pushed for press and set up a direct communication channel with blogs.”

Ms. Wennmachers organized regular off-the-record dinners for reporters at the homes of Mr. Andreessen and Mr. Horowitz, frequently pitched story ideas about the firm’s partners and portfolio companies and encouraged each partner to set up a blog.

Bloggers have become protective of the firm, attacking any reports that cast Andreessen Horowitz in a negative light. Dan Primack, who blogs on venture capital for Fortune, recently wrote of the Andreessen firm: “The adoration is deserved. Sorry.”

Mr. Andreessen, along with a host of other venture capitalists and shops, also invested in blogs that cover start-ups and venture capital like PandoDaily.

Three years later, the firm has done hundreds of media interviews and — not surprisingly — its founders have approached idol status. In last year’s Vanity Fair’s annual “New Establishment” list, a ranking of the year’s 50 top influencers, Mr. Andreessen and Mr. Horowitz were ranked higher than Justin Timberlake and Jon Stewart of “The Daily Show.”

Mr. Horowitz’s blog, in which he writes about business lessons and often quotes his favorite lyrics from hip-hop songs, now has 10 million followers. Harvard’s hip-hop archives recently invited Mr. Horowitz to speak and Snoop Dogg, the rapper, recently requested a meeting with him. All that pitching seems to have paid off. A recent survey by the law firm Dorsey & Whitney, a Silicon Valley law firm with a designated venture capital practice, asked 336 entrepreneurs to name the top venture capital firms. In metropolitan areas like San Francisco and New York the entrepreneurs said they would rather take financing from Andreessen Horowitz than any other firm.

And in just three years, the firm has raised $2.7 billion — more than any other venture capital firm in that same time span, according to the National Venture Capital Association.

Now, up and down Sand Hill Road, venture capitalists, many of whom once shunned publicity, suddenly seem starved for it. In the last year alone, Sequoia hired Andrew Kovacs, a P.R. manager from Google. Kleiner Perkins Caufield & Byers hired Christina Lee, the former head of communications at Hulu, the online television site. Lightspeed Venture Partners hired Kelly Mayes, a former director of communications at AOL.

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Marc Andreessen was on the cover of the May issue of Wired.

“There has been a definite shift in the importance of brand awareness in venture capital,” said Rob Coneybeer, a managing director at Shasta Ventures, whose firm is now looking to hire a full-time marketing person.

Still, some venture capitalists think the self-promotion is fast approaching the level of shameless. “The marketing around V.C.’s is approaching what I might describe as an epidemic,” said David Hornik, an investment partner at August Capital. “I don’t quite understand the venture capital celebrity. We should be supporting actors. The entrepreneurs do the work and deserve the credit.”

“If venture investors are spending time with public relations people talking about how important and valuable they are, they are necessarily doing it at the expense of entrepreneurs,” Mr. Hornik said.

Ms. Wennmachers is quick to point out that Andreessen Horowitz, an investor in Skype, Facebook and Zynga, has already returned investors $288 million of the first $300 million fund it raised in 2009 — a quick turnaround given that the typical life span of a venture capital fund is 10 years.

But don’t expect the public-relations push to slow down anytime soon. Ms. Wennmachers recently hired Kiersten Hollars, a public relations expert, from AOL. The firm closed two new funds totaling $1.5 billion in February.

“People think we’re too brash and loud, but we want to be a disruptive start-up — that has been our goal from the start,” Ms. Wennmachers said. “We’ve opened the black box. We’ve introduced transparency and competition into the game. So to say ‘Oh, you shouldn’t do that.’ Well, tough.”

A version of this article appears in print on July 23, 2012, on page B1 of the New York edition with the headline: Venture Capital Firms, Once Discreet, Learn the Promotional Game. Order Reprints|Today's Paper|Subscribe